A New Low for the California State Bar – HOMEOWNER & LAWYER ALERT!
Homeowners in California had better get serious about this issue and fast. Speak now or you may just find yourself forever holding your peace… as you lose your home to foreclosure.
The question is:
Should a homeowner at risk of foreclosure be able to hire an attorney to help with a loan modification if the homeowner wants to do so?
Because the California State Bar says the answer is no.
It’s become clear that the California State Bar doesn’t want you to be able to hire a lawyer… ever… if it has to do with getting a loan modified to avoid foreclosure.
For the record… I’m a homeowner who is not at risk of foreclosure… not today, anyway. I am, however, deeply offended by the idea that were I to find myself at risk of foreclosure, I could potentially find it impossible to obtain legal representation. I find that thought nothing short of horrific… and more than that I find it entirely un-American.
The fact is that the State Bar is working to deprive homeowners from obtaining legal representation having to do with getting a loan modified in order to avoid foreclosure and the article below is clear evidence of that fact. It seems obvious that the article below was designed to look like a news story, but was generated by the P.R. department at the California State Bar in direct response to my recent articles and podcasts on the topic.
I’m reprinting the article exactly as it appeared in the Los Angeles Daily News, and including my commentary following various sections to emphasize what is really going on. I hope every homeowner will wake up to what’s going on, and email their elected representatives to say that this is completely unacceptable.
Lawyers prey on foreclosure-facing homeowners in San Fernando Valley and beyond
Paulette Breen, seen in the living room of her Van Nuys home, is the victim of unscrupulous lawyers feeding off the mortgage crisis in California. (John McCoy/Staff Photographer)
Suspecting fraud, the Van Nuys resident hired a lawyer to sort things out.
That only made things worse.
Okay… PAUSE: Do you see what the situation is thus far? Paulette Breen ON HER OWN applied for and received a loan modification offer from her bank … but her payments ended up higher. There are many possible reasons for this to have happened, for example maybe her loan was interest only and now she’d be paying principal and interest, instead of just interest only. I don’t know the situation from the article, but I do know she didn’t hire a lawyer until AFTER she got the loan modification offer from her bank.
The attorney told her there was indeed fraud, and promised to sue the bank and get her a new loan. She paid him $8,000 upfront and he advised her to stop making her mortgage payments while the matter was being pursued in court.
That turned out to be very bad advice. Now, the attorney has been disbarred for a host of complaints from multiple clients, and Breen, a cancer survivor, is about to lose her home of 20 years.
“I’m scared,” Breen said. “I’ve done everything the way I’ve been brought up — I pay my bills, I don’t bother you. I don’t even have a parking ticket. And I’m losing everything.”
Breen is among more than 1,000 victims of attorneys across the state who have targeted homeowners facing foreclosure as part of the fallout of the mortgage crisis that began in 2007.
These attorneys charge fees with the promise of stopping the foreclosure, but then don’t follow through with the case and disappear with the money, according to Laura Ernde, spokeswoman for the California State Bar, which has reported a spike in these types of cases.
Okay… PAUSE: First of all, Breen hired a lawyer to file a lawsuit against her bank and that attorney charged her $8,000 in an upfront retainer. And I feel for this woman’s plight. But, a couple of things are odd. The article says that her lawyer “advised her to stop making her mortgage payments while the matter was being pursued in court.” It seems odd because it would seem to me that she would have had to have already stopped making her mortgage payments when she applied for her loan modification. The other thing is Laura Ernde from the State Bar saying there’s “a spike in these types of cases.” I’m sure there has been a spike in these types of cases, but what is the Bar doing about them? I’ll come back to that, but let’s go back to the article…
Since 2009, the State Bar — which created a task force solely to focus on the issue — has received more than 10,000 complaints of loan modification scams and has investigated thousands of cases. Disciplinary charges have been pursued in 1,186 cases involving 153 lawyers, according to Ernde. So far, 69 attorneys in 581 cases have been disciplined and 18 cases have resulted in disbarment. About 720 cases are still pending and another 291 are under investigation.
Okay, PAUSE… The numbers the State Bar is providing have to do with lawyers offering to assist homeowners with loan modifications… not the filing of lawsuits against banks. I recently published these same numbers in an article I wrote about the State Bar and lawyers helping with loan modifications.
Back in 2009 then State Bar president Howard Miller told the pres the following:
“At least hundreds and perhaps thousands of California lawyers who have been victimizing those who are already victims at the most vulnerable point in their lives… every one of those lawyers will be subject to discipline and some will go to jail.”
Just consider that as of May 12, 2012, also according to Laura Ernde, spokeswoman for the California State Bar State Bar Press Office, since February of 2009, more than three years after Mr. Miller voiced those inflammatory allegations:
- Since 2009, 18 attorneys in California have been disbarred related to providing loan modification services.
- The State Bar has “pursued disciplinary charges related to loan modification services involving about 153 attorneys.”
- Of those, only 69 have been disciplined in some way, which includes anything from being required to attend an ethics class to a temporary suspension.
- None have gone to jail.
To be blunt, when the Bar uses the term “cases,” it means “complaints.” You can see it in the numbers in the article, 1,186 cases equals 153 attorneys and of those attorneys 69 have been disciplined… and 18 have been disbarred or voluntary suspended.
And none of this has anything to do with filing lawsuits against banks, which is what the article was about, right?
Now, back to the article…
“People were faced with losing their homes, so some attorneys were sort of preying on distressed homeowners,” Ernde said. “They work with clients to pay upfront fees, promising them that paying would get them help with the mortgage so you can keep your house.”
More than 2.1 million homeowners in California are underwater on their homes, according to the Campaign for a Fair Settlement, a national coalition advocating on behalf of distressed homeowners.
Glendale, Santa Clarita, Palmdale and Lancaster are among the cities in L.A. County that have the highest number of foreclosures, according to ForeclosureRadar, which tracks county recorder filings.
But there are no hard numbers on just how many homeowners have been victimized. Oftentimes, victims are immigrants or from low-income families, and may not know where to turn for help after they’ve been scammed.
“Is it happening very frequently? Absolutely,” said Charles Evans, an attorney with the Los Angeles-based Legal Aid Foundation, which provides legal help for the poor. “We have seen dozens of these folks each just over the last year and for every one of those, there are dozens more that don’t end up coming our way.”
Sometimes, it’s ignorance. Some of the consultants are real estate brokers who switched over to law or attorneys who may not be familiar with foreclosure laws, according to Evans.
But often, it’s more sinister. Evans has handled cases where attorneys will place liens on the home to secure money they think they’re owed, taking advantage of immigrants’ lack of English skills and getting them to sign over deeds.
“They’re just playing the odds,” Evans said. “The folks that they target are desperate, they’re scrambling from place to place to try and save their home. They rarely take the time to file a lawsuit or file a complaint.”
Breen, an Emmy-winning TV producer, is neither an immigrant or poor — proof, she says, that anyone can fall victim to the scams.
“It’s not just average middle-class people,” Breen said. “It’s people who do business, run a business, and get scammed.”
Her former attorney, Ghassan “Gus” Bridi, who headed an Encino law firm, was disbarred in February after a State Bar investigation of his clients’ cases, which also included those unrelated to foreclosures.
The Bar found that he had failed to perform with competence in Breen’s case by failing to serve complaints or appear in court for hearings, allowing the bank’s attorney to get the lawsuit dismissed.
His complaints involving other clients included failure to obey court orders, perform with competence and inform clients of developments in their cases.
Bridi could not be reached for comment.
In a statement to the State Bar, however, Bridi wrote that he had been struggling to cope with stress, anxiety and depression from his caseload.
“I managed to hang on and keep the practice afloat and deal with the challenges associated with a small practice,” he wrote. “Though the daily mental stress associated with this and the lack of assistance quickly became overwhelming again, and again I began falling behind on a few files.”
Here’s what the California State Bar’s Website says about Bridi…
October 20, 2011
GHASSAN G. BRIDI, 41, of Encino was suspended for three years, stayed, placed on three years of probation with an actual one-year suspension and until he makes restitution and he was ordered to take the MPRE and comply with rule 9.20 of the California Rules of Court. The order took effect Oct. 20, 2011.
Bridi stipulated to 39 counts of misconduct in 13 cases, many involving his failures to negotiate loan modifications for his clients. The misconduct included failures to perform legal services competently (eight counts), respond to client inquiries (11 counts), refund unearned fees (nine counts), return client files (eight counts), and one count each of failing to report court-ordered sanctions to the State Bar or cooperate with the bar’s investigation. He also violated a court order. He was ordered to make restitution totaling $18,573 to nine clients.In one matter, for example, a couple paid Bridi a $3,000 advance fee to provide them with loan modification and loss mitigation services, including negotiations with their mortgage lender about restructuring their debt and avoiding foreclosure of their home. He didn’t respond to their emails or phone calls and the couple received three past-due notices and payment demands. When they contacted their lender directly, they learned Bridi had not started any loan negotiations.In a real estate case, he stopped communicating with his client and did no work. He filed an incomplete bankruptcy petition for another client, did not attend a meeting of creditors and the petition was dismissed for failure to prosecute. Although Bridi said he would file a motion to reopen the bankruptcy, he didn’t do so. He was sanctioned $1,500 by the federal court in another matter, but never paid the sanctions or reported them to the bar. Bridi was privately reproved in 2001. In mitigation, he was hospitalized, suffered from depression and enrolled himself in the Lawyers Assistance Program. He no longer handles loan modification or real property cases.
And next the article brings up another lawyer that has been disbarred having to do with filing lawsuits against banks, Phil Kramer. Kramer’s well-publicized case was complex and again, really has nothing to do with Paula Breen.
Another local attorney, Philip A. Kramer, of Calabasas, was being disbarred this month after the State Bar found that he was involved in a home loan modification scam that targeted financially strapped homeowners through mass mailers that looked like official documents from mortgage lenders.
This led the homeowners to think they were potential plaintiffs in a national litigation settlement, and they often paid $3,500 to $10,000 for retainer fees. But they were never contacted by an attorney or included in a lawsuit, according to the State Bar.
Kramer and his attorney did not return calls for comment.
But according to the State Bar, he admitted to numerous counts of misconduct including collection of illegal fees, failure to return advanced fees and accepting employment in states where he was not licensed to practice.
He has agreed to pay $122,000 in restitution to 27 former clients, according to the State Bar.
And then the article concludes as follows…
The homeowners often have few venues for recourse. One option is the State Bar’s Client Security Fund, which pays capped amounts for victims of dishonest lawyers.
“The fact that they were taken advantage of by these guys doesn’t help them at all on these mortgage issues,” Evans said. “They may have spent their last money, and have nothing to deal with the banks. They’ve usually used up whatever time or whatever money they had to work out something.”
Financially strapped homeowners are urged to check on potential lawyers through the State Bar’s website for any disciplinary issues, or contact federal Housing and Urban Development-certified loan counselors for free assessments.
And never agree to upfront fees, as it’s illegal, Evans said.
“If they’re breaking one law, what makes you think they won’t do anything else?” Evans said.
As for Breen, she’s hoping the bank will give her more time to pay off her loan.
If not, her house may be up for a short sale or be auctioned off on June 6 — in both cases, forcing her out of the French country-style home she’s lived in for 20 years.
“There’s nothing worse than at 4 in the morning, you wake up, and you don’t cry, because you can’t,” Breen said. “What you do feel is your stomach hit your back, and you can’t breathe.
“I have beat cancer, I have beat chemo, radiation. They were easy,” Breen said. “But losing your identity, that’s what a home is. I don’t know what I’m going to do.”
Here’s the bottom-line.
In California, a state with over 235,000 licensed attorneys, the disbarment of 18 lawyers is hardly to be considered pandemic. And it’s a far cry from Miller’s “hundreds if not thousands,” to be sure. There simply never were hundreds much less thousands of lawyers scamming homeowners in California.
What this whole thing is about is a California law known as SB 94, which says that lawyers and/or Department of Real Estate licensees cannot…
“…claim, demand, charge, collect, or receive any compensation until after the person has fully performed each and every service the person contracted to perform or represented that he or she would perform.”
But, as it pertained to DRE licensees, however, SB 94 went a step further by modifying language contained in Business & Professions (“B&P”) Code Section 10026 to prevent DRE licensees from breaking up loan modification services or fees into component parts as shown below in bold:
DIVISION 4. REAL ESTATE
PART 1. LICENSING OF PERSONS
CHAPTER 1. GENERAL PROVISIONS …………………………. 10000-10035
10026. (a) The term “advance fee,” as used in this part, is a fee, regardless of the form, that is claimed, demanded, charged, received, or collected by a licensee for services requiring a license, or for a listing, as that term is defined in Section 10027, before fully completing the service the licensee contracted to perform or represented would be performed. Neither an advance fee nor the services to be performed shall be separated or divided into components for the purpose of avoiding the application of this division.
As a result, a DRE licensee can only view a loan modification as a single service, and therefore only be paid after that one service has been provided, which would be when the homeowner is either approved or denied for a loan modification… the very end of the process.
However, there is no language in SB 94 that prohibits lawyers from breaking up loan modification services and/or fees into parts, as there is for DRE licensees.
Therefore, while SB 94 precludes lawyers from charging advance fees, the law does allow lawyers providing loan modification services to be paid for a specific set of contracted services upon their completion, regardless of whether at the beginning, middle or end of the loan modification process.
The intent of SB 94 was to prevent homeowners from paying for services they haven’t received. So, if a lawyer completes a contracted set of services, there is no reason he or she cannot be paid as agreed for those services once they’ve been completed.
But the article I’ve quoted above, is misleading and frankly dishonest. It implies that Paula Breen was taken advantage of because she paid money to a lawyer in advance of legal services being delivered… and while that may be true… NOTHING THE STATE BAR HAS DONE WOULD HAVE PREVENTED IT FROM HAPPENING. SB 94 does nothing about charging advance fees having to do with filing lawsuits.
Homeowners should take great care when hiring a lawyer for any reason. And I HATE it when anyone gets ripped off for anything, especially when their home is on the line. But this article is a blatant attempt to scare homeowners away from finding a legitimate and ethical practicing lawyer to help them save their homes from foreclosure.
And that should not be the mission of the California State Bar. SO, WHY IS IT?
I’d like the following three things to happen right away…
1. Attorneys involved in helping homeowners with loan modifications need to contact me at firstname.lastname@example.org.
2. Homeowners trying to get their loans modified should also contact me at that address… I’ll do everything I can to help.
3. Homeowners who have successfully gotten their loans modified whether with or without legal representation, should also contact me.
Let’s get to the bottom of this and make things going forward work better. So far… everything has failed. And that has to stop.